Nongfu Spring has announced plan to invest Rmb 5 billion (US$700 million) in a bottled water plant project near Chengnan New District near Jiande City, East China.
The new 66-hectares mega manufacturing site, subject to successful land acquisition, will bottle water and other beverages. The local government has agreed to build infrastructures to support this new site as part of the land use agreement with Nongfu Spring.
A spokesperson from Nongfu Spring commented that the new site will enable the company to leverage on the high-quality natural water resources of Thousand-island (Qiandao) Lake, and build its brand and market position.
The new project will be built in 2 phases over 5 years.
Established in 1996, Nongfu Spring is one the leading packaged-water producers in China. In its latest report, the company recorded annual revenue of Rmb 33.2 billion, with 54% of its revenue derived from packaged water followed by tea-based products (15%) and functional drinks (12%). Nongfu Spring is also one of the best performing companies in China with a gross profit margin of 60% and an impressive net profit margin of 28%.
Despite the impressive track record, Nongfu Spring also faces challenges in rein in rising costs especially for packaging materials like PET plastic bottles, caps, labels, and beverage ingredients.
Nongfu Spring raised US$1.2 billion in its IPO listing in Hong Kong in 2020, and the fund is expected to run dry by the end of this year with the construction of the new project. Demand for bottled water is strong in China, as the domestic market is only able to supply 16% of the country’s domestic need. It faces competition from international players like Nestle and Coca-Cola amongst others.
